Wisconsin’s Kauffman Rankings: Where we go from here

This week the Kauffman Foundation released its annual report on the state of Startup activity in the US, and Wisconsinites were dismayed to see Wisconsin dead last on the rankings for a second consecutive year (though Madison is a bubble of progress)

Regardless of your opinion on these rankings, every time a report like this comes out, people search for reasons why the state ranks poorly, and what we can do about fixing it. Proposed solutions touch on tax policy, culture, and a whole lot more.

However, rarely does the discussion cover what I consider to be actual issues we need to solve, most likely because they are uncomfortable and divisive due to the fact that they directly challenge political and social opinions. You can bet the local news isn’t going to wade into this controversial territory.

I’m one of those (evidently) rare startup founders in WI building a VC-backed company, soI feel compelled to add my own color on what helped or didn’t help us as we built and scaled out our business. We’ve raised over $12M dollars from investors all over the US while keeping our HQ in Madison, so I’ve had a few good opportunities to feel the rough edges.

Here’s what I think will actually move Wisconsin forward as an entrepreneurial hub:

  1. Insurance Policy. How will I ensure I have medical coverage when I start off? Without investment in social fabric, insurance is a major risk of starting a company and was a big discussion Ben and I had before we made the leap. I was so fortunate that I was able to use my parents health insurance for the first few years, but that wasn’t the case for Ben. If I didn’t have insurance I might have just stayed put at my job. 
    This has changed slightly with the Affordable Care Act but the costs are still very high and ACA is at risk in the current political climate. We need to ensure taking a leap is a safe bet and doesn’t come with the risk of major financial ruin due to unforeseen medical costs.
  2. Transportation. Cities that are drawing talented people are ones where one can live car free and get around everywhere. These cities offer trains, subways, trams, ferrys, and more. I don’t believe private industry will solve this problem, we need to invest at the public level (whoops). We need to take some big risks and be ambitious here. Millennials aren’t buying cars and many wish to live car free. Cities that embrace this will find it easier to relocate and draw in talent and find their urban environments flourish. I give Madison major credit here for being a leader in bike friendliness. Let’s take that gumption and solve mass transit next (while maintaining wonderful walkability!)
  3. Diversity. Lack of diversity in the tech industry is a major issue. On top of bringing more minorities and disenfranchised people into tech and investing in their ventures, we need to dramatically open our doors to immigrants. Data shows that over half of the highest growth businesses were started by immigrants. States refusing refugees or introducing “bathroom bills” do serious harm to those trying to recruit and relocate talent. When talent has the choice of where to go, why would they pick a place that actively turns them away? 
    I’ve been embarrassed about our lack of diversity in Madison when trying to recruit, and I know it hurts. We need to fix this.
  4. Universities. Every metro wants to be the next Silicon Valley, but they miss the crucial role that Stanford has played in building that ecosystem. UW-Madison is an internationally acclaimed research institution that draws brilliant people from all over the world. Yet, funding to UW-Madison has been significantly cut recently. The university is losing key faculty to other cities, and the reputation of the institution has diminished.
    I don’t say this lightly: UW-Madison is the most important institution in the entire state. Nearly half of Ionic employees are UW grads and it’s the sole reason many of them even came to Madison. If we want any chance of building a major startup ecosystem, we need to do whatever we can to ensure the university has the resources to be competitive internationally. Without this we lose a major draw for diverse talent and name recognition around the world.
  5. Social Progressivism. Regardless of your position on social issues like gay rights, prescriptive environmental policies, marijuana use, etc. the reality is that the talent we are trying to attract has largely been drawn to places where the environment is more left than right. Social Conservatism turns people away and isolates states. Not to mention makes them miss out on major new markets and tax sources that are associated with entrepreneurship.

Notice how I didn’t mention lowering taxes anywhere? That’s because I have never once considered tax policy while building this company. It’s not relevant for startup founders assuming all states are close in policy (so no, Texas’ lack of state income tax isn’t pulling me in). Sure, reducing taxes to spur investment might help, but I think it’s foolish to assume that startups care about the traditional right-wing fiscal conservatism. Instead, we want tax money to go into programs that build safety nets and make our cities easier and safer to live. We want to pay taxes, but we want that money spent well.

Additionally, the midwestern risk averse culture is often pointed at as a reason more people aren’t starting companies. I think it’s definitely relevant, but by solving the issues above, we will help reduce that. Frankly, there are real risks to starting a business today in America, and if it’s not seen as reckless then I think this problem will solve itself. There’s a reason that so many founders are rich white kids. If we want others to start companies, we need to make it financially safer to do so.

To me and other founders like me, what matters is making sure talented people want to live and move here. That I can say “Wisconsin” without getting laughed at, without someone bringing up some embarrassing policy that makes me regret ever investing in this place.

I think it’s important to note that I am a critic of Madison and Wisconsin because I like it, and I think Madison is a wonderful place to build a company (though I grew up in Milwaukee I am not involved in the scene enough to speak on it, nor any other WI city). If I didn’t think there was potential to transform Madison into a major tech hub I wouldn’t be building my company here! However, I am not a cheerleader for the state nor do I wish to sugar coat the challenges. So, please read this critique as a optimistic though unapologetic list of opportunities and challenges we have in front of us.

Until we can address the above challenges as a state and as individual cities, we will never make Wisconsin a leader in startup activity. We can’t have it both ways.